At the end of the first quarter of this year, after six months of rapid expansion, the economy entered a quieter phase. The quarter-to-quarter growth in output, which in the previous six months had averaged over 5 per cent at annual rates, probably fell back in the second quarter of this year to well under half that figure.

The growth of production in the industrial countries seems to have been less rapid in the second quarter. It must be expected to slow down further under the impact of the measures taken in the United States to reduce the budgetary deficit. We still expect the rise in the combined national outputs of the industrial countries to be around 4½ per cent this year, but on present policies it may be no more than 3½ per cent in 1969 and a good deal less than this in the twelve months to mid-1969. Unemployment is still high by the standards of most recent years; its downward movement appears to have been checked again or even reversed in a number of European countries and its general tendency over the next twelve months is likely to be upward, particularly in the United States.

A new group of firms has emerged since the war in Europe specialising in the design, ‘engineering’, and construction of process plants for the oil and chemical industries. These contractors undertake both the design of the plant and the procurement of the ‘hardware’ components used in the installations. Consequently the orders which they gain in world markets have a considerable indirect effect on the exports of the engineering industry, as well as providing invisible income.